Quiz 11: The Asia Pacific Region

Business

Definition of various terms including "The Greater China", purchase price parity (PPP), Four Asian Tigers, Bottom-of-the-Pyramid markets (BOPMs), ASEAN, ASEAN+3, and APEC are given below: The Greater China: This term is mainly used to describe the economic and cultural ties between four territories including Mainland China, Taiwan, Hong Kong, and Macau. It is generally used to represent the economic integration between these territories. Purchase price parity (PPP): As per this theory, if the purchasing power of two countries is same, then exchange rate between their currencies would remain in equilibrium. Four Asian Tigers: This term refers to the highly developed countries in Singapore, Taiwan, Hong-Kong and South Korea. These regions have successfully maintained high level of economic development after industrialization. Bottom-of-the-Pyramid markets (BOPMs): This term is used to represent the people across the globe whose annual income is less than $1,200. There are nearly 4 billion people across the world whose income is below this level. ASEAN: Association of Southeast Asian Nations is one of the largest multinational trade groups in Asia. It was established in 1967 to increase economic growth and stability among the member nations. ASEAN+3: It refers to the association of 10 countries including ASEAN countries, China, Japan, and South Korea. Senior officers as well as ministers from all these countries work jointly towards the resolution of crucial political, legal, and economic issues. APEC: APEC refers to the Asia-Pacific Economic Corporation. It is developed for providing a formal platform to the government of different countries for discussing trade and economic policies and activities.

Strategic planning is defined as a procedural way of relating to the future. It can be explained as an effort to manage the effects of external uncontrollable factors on the organization's strengths, weaknesses, objectives, and goals to attain a desired end. In today's world, the marketing organizations are not restricted and have expanded vastly making the entire world an arena for business. The global market opportunities are on a par with the expansion of economies, with the increasing purchasing power, and with the changing consumer taste and preferences. The economic, social, and political changes affect the practice of business worldwide, the business organizations have to remain flexible enough to react rapidly to changing global trends to be competitive. Domestic Marketing is concerned with the marketing practices within the researchers or marketers with their home country International Marketing is the performance of business activities designed to plan, price, promote and direct the flow of a company's goods and services to consumers or users in more than one nation for a profit. Major differences which occur between domestic marketing and international marketing are role of political, social, technological, financial factors involving language, culture, risk and marketing activities involving product mix, product planning, development etc. Some of the factors are explained below: Growth strategies: Domestic marketing focuses on strategies to increase of market share while international marketing focuses on strategies for expanding into new markets. Human resource management: Domestic marketing does not focus on recruiting diverse employees while international marketing focuses on employing culturally diverse employees breaking regional barriers. Markets: Domestic marketing have homogeneous mixture of market segments with limited competitors while international markets have more fragmented and diverse mixture of markets with huge competitors all over the world.

From page 308 of the text: Japan's fast growth in the 1970s and 1980s amazed the world. Came the early 1990s and Japan's economy came up with a stunning surprise. Almost abruptly it slowed, sputtered, and stalled. Stagnation set in and tenaciously persisted. Four explanatory themes have emerged; each has a basis in observable fact: 1) Japan's faulty economic policies; 2) their inept political apparatus; 3) their disadvantages from global circumstances; and 4) their cultural inhibitions.      Each of these four has their proponents, each their own rationale. So let's examine each separately.      1. Faulty Economic Policies. A wealth of facts reflect Japan's economic pain during the 1990s. None more so than their stock market collapse. In the early nineties, its Nikkei index level plummeted from over 35,000 to under 13,000. At this writing it now hovers at about 10,000. Their woefully inflated real estate values similarly hit the skids. Their once huge (and to some Americans alarming) flow of investment into this country simply dried up. The end result found Japan with an economy once accustomed to nearly double digit annual growth rates now struggling - at first to stay barely above no-growth levels, and then crashing to "minus growth," that is, a recession in 1998.      Economic recessions are not, of course, unknown. But the peculiar feature of Japan's 1990's version was its decade-long persistence. Unsurprisingly, most economists sought to convince us that faulty economic policies both triggered the onset and the persistence of Japan's troubles. They explained with commendable brevity.      "The bubble burst." But why the bubble, and why did it burst? The most common answer went somewhat as follows. Decades of galloping economic recovery success had bred a prideful national overconfidence. Growing willingness to take exaggerated risks followed. Heavy borrowing soon drove up levels of marginal investment. Eventually, lending agencies began to edge away from confidence toward caution. With the caution flag up, almost suddenly the whole inflated structure collapsed. Caution also filtered down to consumer levels. Spending habits were curtailed. With a fall in product demand, industry was forced to cut back both output and hiring. Unemployment soared to unheard of levels for that nation. The main casualty, however, was the widespread deterioration of national confidence.      No sector was hit harder than Japan's lending institutions, especially their huge world class banks. Came the crash and the banks looked at loan portfolios splashed with red ink. Lending had to be restricted, a practice that dried up sources of capital needed for financing economic recovery. And so it went, one discouraging development following another, until a verifiable national crisis existed.      Seeing all this, American authorities and economists could not resist the temptation to offer remedies. "Draconian measures are needed," they chanted from across the Pacific. Understandable advice from on high, no doubt, but reflecting ignorance of the Japanese society's cultural prejudice against any action that might call for bold or rapid change. Please always remember, Japan values stability above all else.  Part of the problem here is that most economists focus on overall economic performance and the dramatic slowdown in Japan's growth, tax revenues, and the potential disaster of deflation.  And, therefore most economists have missed the real miracle of Japan's economic prowess.  Please see Exhibit 11.1. img Source: World Bank, 2010.  First, please notice that when you control for purchase price parity (PPP) in the per capita GDP calculations Japanese growth simply wavered during the 1990s.  That is, the PPP calculation takes into account deflation and most simply illustrates the average wellbeing of the Japanese people. Yes, per capita income fell, but so did prices.  You can see that Japan pretty much avoided the Asian financial crisis the resulted in a precipitous economic decline in neighboring S. Korea.  Indeed, using this metric the stability of the Japanese economy is miraculous particularly given the troubles their close neighbors experienced in 1997 and particularly the dimensions of both their stock and property market declines in the early 1990s.  Indeed, it is hard to imagine how the United States' economic performance would respond to simultaneous sixty percent declines in both the NYSE and housing markets.        2. The Political Explanation. Views of economists on Japan's crisis have not been the only ones heard. Political pundits also rose to the challenge. They found two major villains: Villain #1: The Country's Long Entrenched Liberal Democratic Political Party. Villain #2: The Hidebound Japanese Bureaucracy.      Back in the 1970s, an authority on just about everything Japanese, one Frank Gibney, had written a seminal book on the nation. He called it The Fragile Superpower. His insight into the possible future of their then surging economy was confirmed when the 1990s brought on crisis conditions. "Fragile" proved to be an apt tag.      In a new appraisal, Gibney now wrote that Japan had become the victim of "one party sickness," an ailment brought on by a 40-year hardening of political arteries. Meanwhile, many observers thought politicians had to share blame with Japan's powerful bureaucracy. In fact, many both inside and outside Japan had long since come to believe that the bureaucracy actually controlled their elected politicians. Of course, in a consensus-type society it is not easy, particularly for outsiders, to tell where one institution's power leaves off and another's begins. In any event, to those who championed a political explanation of Japan's woes, these two national institutions were viewed as joint culprits.  Meanwhile, other observers, particularly many within Japan, were dissatisfied with either the economic or political explanations they were hearing. They felt compelled to look for deeper roots.      3. Global Circumstances Have Hurt. The third explanation for Japan's end-of-the-century economic problems has more to do with three circumstances beyond their control.      First, the Japanese population, like the western European is shrinking faster than the American. While American baby-boomers circa 2005 were at their peak of productivity, both the Japanese and Europeans are about 10 years ahead of us in adjusting economic, political, and cultural systems and institutions to population decline and graying hair. And this adjustment is costly-just wait until 2015 in the U.S. to see how costly.      Second, Japan has serious disadvantage in the information age-it's complex language. Not only did three alphabet systems hinder software innovations appropriate for world markets, but the fundamental indirectness of the Japanese linguistic system hinders electronic information flows generally. So Japan hasn't participated in the information technology explosion which drove the American economy to precarious heights in the late 1990s. We would be the first to argue that Japan is now catching up particularly as software advances have made the structure of the Japanese language less a hindrance in the digital age.  Also, a 9/11 caused slowdown in international travel has pushed Japanese businesspeople to become more adept with email and other electronic communication media.      Finally, with American baby-boomer households operating at peak consumption levels and oil at historically low real prices Sports Utility Vehicles (SUVs) were the rage in the U.S. during the last decade.  Japanese auto firms, which drove the 1980s boom in Japan, came quite late to the American SUV market. Honda was the last and very late entrant. Certainly, in the short run, this was a huge national economic disadvantage for Japan.?But, now the reluctance to bet so much on big car designs has proven much to the advantage of Japanese car makers.  A good argument can now be made that they are leading Japan toward a new resurgence.      4. The Cultural Explanation. In the mid-nineties, we became aware of what might be called "The Cultural Causation" theory of it all.  This theory went somewhat as follows: Immediately after World War II a shattered Japanese nation arrived at a consensus goal for national recovery. That consensual goal provided the incentive for their spectacular progress decade after decade. Then during the late 1980s the Japanese people stepped back and looked around at their manifest achievement. It was easy to conclude they had indeed reached their coveted goal. So the question for them now became "all right, what's next?"      Perhaps more than any other society the Japanese have an affinity for united effort. They seem inspired by common striving toward a common goal. Lack of one can present a problem.      Others who champion a cultural explanation of Japan's 1990s woes don't limit their reasoning to an absence of a national goal. They point out that during most of our twentieth century building of a strong enterprise structure provided the key to continuing success. Then with the advent of globalized competition, their inflexible structure became a hindrance. Agility, not structure, became the prime need. As has been pointed out, American corporate enterprise has met this need by wholesale restructuring and a blizzard of mergers, acquisitions, and consolidations. Standard Japanese practices such as lifetime employment, job promotion based not on merit but on length of service, reciprocal contractor/subcontractor loyalties, and a dozen others have inhibited adaptive corporate measures. To put it simply, the American enterprise scene handled its adjustment to our new economic era better than the Japanese had done.      Japan is expected by most to continue its slow-growth economy during the second decade of the 21 st Century. Even as large companies have ambitious new growth plans, [1] economic cross-currents continue to roil with unemployment[2] continuing and Toyota's 2010 quality problems disrupting that crucial company's contributions to the economy. However, economists and governments all over the world are using Japan as a model for policy making as Japan has been the first to manage a big recession and its fast-graying population by strategically growing government debt. [3]

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